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Sonntag, 30. Juni 2013

Investors plan appeal of Stanford lawsuit dismissal

By JOE GYAN
JR.

A federal
appeals court will be asked to reverse a Baton Rouge federal judge's dismissal of a
lawsuit that claims the Securities and Exchange Commission and a former
official knew of Robert Allen Stanford's $7 billion fraud scheme but failed to
investigate and stop it, an attorney for some victims said Friday.

The suit,
filed in July by seven Baton Rouge residents and firms, was thrown out
June 21 by U.S. District Judge Shelly Dick at the request of the federal
government, which argued the SEC enjoys complete discretion in deciding what
matters to investigate.

The suit
alleges that Spencer Barasch, a former SEC regional enforcement director in Fort Worth, Texas, was negligent and engaged in
deliberate misconduct in failing to investigate the scheme before investors
suffered losses. The suit contends Barasch knew of the Stanford scheme but
refused to probe it, allowing the continued defrauding of investors.

In his
written ruling, Dick called Barasch's alleged conduct "disturbing" but
said the law supports the government's position that there was no statute,
regulation or policy that required Barasch to make an enforcement referral to
either the National Association of Securities Dealers or the Texas State
Securities Board.

"While
the court sympathizes with the losses suffered by the plaintiffs in this
matter, plaintiffs have failed to identify any mandatory obligations violated
by SEC employees in the performance of their discretionary duties," the
judge wrote.

Ed
Gonzales, an attorney for the seven Baton Rouge residents and firms who filed suit
in federal district court in Baton Rouge, said an appeal will be filed at
the 5th U.S. Circuit Court of Appeals in New Orleans. Those plaintiffs say they lost
roughly $3.5 million to the scheme.

Dick's
ruling described the suit's plaintiffs as victims of a Ponzi scheme who lost
their investments in Stanford International Bank Ltd.

The suit
alleges the SEC knew in 1997 that Stanford was operating a fraudulent scheme
and failed to stop him until February 2009.

Robert
Stanford, 63, of Houston, is serving a 110-year prison sentence for a
fraud conviction that followed estimated worldwide losses of approximately $7
billion. About $1 billion of those losses were from about 1,000 investors in
the Baton
Rouge, Lafayette and Covington areas, according to estimates by
state Sen. Bodi White, R-Central, and Baton Rouge attorney Phil Preis, who represents
numerous Stanford victims in another lawsuit.

A Ponzi
scheme is a fake investment program. Illegal operators skim most of the money
provided by people who believe they are investors.

Early
investors receive dividends that actually are small portions of their personal
funds and those of later investors. Stanford's Ponzi scheme attracted
investment money for his Stanford International Bank on the Caribbeanisland of Antigua.

There are
more than 20,000 Stanford victims across more than 100 countries.